Megaupload seeks to toss piracy case

MATTHEW BARAKAT, AP Business Writer

Attorneys for the file-sharing site Megaupload.com and its founder, Kim Dotcom, are challenging the federal government's piracy case against them even before company officials have been brought to the U.S. to answer charges.

Lawyers for Megaupload on Wednesday filed papers in U.S. District Court to dismiss charges against the company. Prosecutors have charged Megaupload, Dotcom and other company officials with facilitating piracy of copyrighted movies and TV shows on a massive scale. The case is one of the biggest copyright-infringement cases ever alleged, with prosecutors charging that the piracy cost movie studios and other copyright holders at least $500 million in lost revenue.

The legal motions do not seek dismissal of the case against the individual defendants, but they do seek release of millions of dollars in frozen assets so lawyers can prepare a full defense.

The defense attorneys argue that Megaupload and its officers can't be held criminally responsible for copyright infringement by its users. They also said the company itself cannot be charged criminally in U.S. court because it is a foreign company, based in Hong Kong, that does not even have offices in the U.S. and cannot be legally served notice of the charges.

A spokesman for the U.S. attorney for the Eastern District of Virginia declined to comment on the court filings Wednesday, saying the government will respond in court.

The filing is unusual because Dotcom and his co-defendants have not actually entered appearances in the case. Dotcom, who had his name legally changed, is currently in New Zealand fighting extradition.

Ira Rothken, one of Megaupload and Dotcom's lawyers, said Dotcom is exercising his legal rights by challenging extradition in New Zealand, and shouldn't be punished for doing so by having his assets frozen and making it difficult for his lawyers to fully represent him.

The seizure of more than $67 million in assets is especially egregious, Rothken said, because the case against Megaupload and Dotcom is weak.

In court papers, Rothken and the defense team called the criminal charges "an experiment in stretching U.S. criminal law well past the breaking point."

The U.S. government, in its indictment, alleges that Megaupload was more than a neutral bystander to the illegal conduct of its users. The government alleges that the whole structure of Megaupload was designed to facilitate copyright infringement and reward users who uploaded popular movies and TV shows for public consumption.

Before it was shut down in January, Megaupload was one of the world's most popular websites, with millions of users who stored data with the site, either for free or by paying for premium service. The cache of data stored on Megaupload is roughly equivalent to half of the entire Library of Congress, according to court records. While the government does not dispute that some users of Megaupload were perfectly legitimate, prosecutors and lobbying groups such as the Motion Picture Association of America believe that the vast majority of the 25 million gigabytes stored on Megaupload's servers is content that was copied and shared in violation of copyright laws.

The flamboyant Dotcom made a particularly high-profile target. Dotcom, a German who was born as Kim Schmitz and convicted of computer fraud and manipulating the stock price of an Internet startup but never served jail time, moved to New Zealand and lived something of a playboy lifestyle from his $24 million mansion. He even became the world's highest-rated player of the popular video game "Call of Duty: Modern Warfare 3."

A judge in New Zealand this week ordered the U.S. government to share its evidence against Megaupload and Dotcom so he can evaluate whether the U.S. request for extradition is valid. The extradition hearing is set for August.